NEPALESE CONTRACT LAW
BRIEF ANSWER QUESTIONS – [2 MARKS]
[2023 Fall Q. No. 2] Who is finder of lost goods?
Answer: The individual known as the “finder of lost goods” is one who locates items that have been misplaced by their rightful owner. The legal obligations and entitlements of this individual may differ based on the jurisdiction and the particular details surrounding the discovery.
[2023 Fall Q. No. 8] [2020 Spring Q. No. 3] Differentiate between void contract and voidable contract.
Table for clear differentiation:
| Element | Void Contract | Voidable Contract |
|---|---|---|
| Definition | Not enforceable by law from the beginning. | Valid initially but can be voided by one party. |
| Cause | Lacks essential elements (e.g., legality). | Issues like coercion, fraud, or undue influence. |
| Enforceability | Cannot be enforced by any party. | Can be enforced until voided by the aggrieved party. |
| Example | Contract for illegal activities. | Contract signed under duress. |
[2022 Fall Q. No. 1] What is the difference between executory and executed consideration?
Answer: Table to differentiate between executory and executed consideration:
| Element | Executory Consideration | Executed Consideration |
|---|---|---|
| Definition | A promise to perform an act in the future. | An act that has already been performed. |
| Performance Status | Yet to be fulfilled. | Already fulfilled at the time of the contract. |
| Nature | Future-oriented. | Past or present-oriented. |
| Example | Promise to deliver goods next week. | Payment made upon receiving goods. |
[2021 Fall Q. No. 8] Krishna hires a motorcycle from Hari to go to Pokhara. Krishna goes to Butwal instead of Pokhara. In the course of journey, Krishna meets with an accident. Consequently, the motorcycle is completely damaged. Is Hari entitled to claim compensation from Krishna for the damage?
Answer: Hari has the right to seek compensation. Krishna violated the hire agreement by utilizing the motorcycle for a purpose that was not stipulated, specifically by traveling to Butwal instead of Pokhara. According to the principles of bailment, the bailee (Krishna) is obligated to exercise reasonable care over the property and to use it solely for the intended purpose. Any deviation from the agreed terms heightens the risk associated with the property, and given that the damage transpired during this unauthorized use, Krishna is accountable for compensating Hari for the incurred loss.
[2021 Spring Q. No. 1] Define voidable contract.
Answer: A voidable contract is a legally recognized agreement that remains enforceable until one of the parties, possessing the right to do so, decides to nullify it. This right generally emerges when the contract is influenced by elements such as coercion, undue influence, fraud, misrepresentation, or an error. The contract continues to be binding and enforceable until the affected party formally rescinds it.
[2021 Spring Q. No. 3] Mention the rights of the finder of lost goods.
Answer: The entitlements of an individual who discovers lost property are outlined as follows:
- Right to Possession
- Right to Compensation
- Right to Reward
- Right to Ownership (in certain circumstances)
[2021 Fall Q. No. 2] Who is finder of lost goods?
Answer: A finder of lost goods is an individual who locates and assumes control of items that have been misplaced by another party.
[2020 Spring Q. No. 2] Ajay’s father promises his son Deepak to sell his car and provide finance for his MBA education. Deepak promises to perform his best. Deepak gets admitted to the course. However, after 6 months, his father, Ajay decides not to fund Deepak’s education. Deepak alleged his father that he breached the contract. As per the law of contract, this is not considered contract. Give reasons to justify this.
Answer: The arrangement between Ajay and Deepak does not constitute a contract due to the absence of mutual consideration. Deepak’s commitment to exert his utmost effort is not legally adequate. Furthermore, there is no intention to establish legal relations, as this seems to be a familial promise rather than a formalized agreement. Given that the agreement is unilateral and lacks enforceable provisions, it fails to satisfy the requirements for a valid contract.
[2019 Spring Q. No. 2] Upendra invited his two friends for the dinner on April 1st at his home at 6.30 p.m. When the invitees came to his house they did not find Upendra and got puzzled. Can they bring any action against Upendra in such case?
Answer: No, Upendra’s friends cannot take legal action against him. The dinner invitation was a social agreement, not a legal contract. Social agreements don’t create legal obligations because they are not meant to be enforced by law. Since Upendra’s invitation was just a friendly gesture, there’s no legal basis for his friends to sue him.
[2019 Spring Q. No. 8] What are the two legal consequences of any agreement entered into with a person who has not attained the age of 18 under the chapter on contract in the National Civil (code) Act, 2074?
Answer: Under Nepal’s National Civil Code, 2074, if a person under 18 (a minor) makes an agreement:
- The agreement is not fully binding: The minor can choose to cancel it anytime, even after turning 18.
- Restoration: If the minor cancels the agreement, they can return anything they received or pay for the value of it, but they are not forced to continue the agreement.
[2019 Fall Q. No. 2] Anil agrees to steal a watch from a shop for Bipin. Bipin promises to pay Anil Rs 500. Is this a contract? Give two reasons for your answer.
Answer: No, this is not a valid contract. The two reasons are:
- Illegal Objective: The agreement involves the illegal act of stealing, which makes it void. A contract cannot be formed for an illegal purpose under the law.
- Lack of Legal Enforceability: Since the contract is based on an unlawful activity, it cannot be enforced by law. The legal system will not support or enforce any contract that involves illegal actions.
[2018 Fall Q. No. 3] What are the essentials of contract of indemnity?
Answer: A contract of indemnity involves the following essentials:
- Promise to compensate loss: One party agrees to compensate the other party for any loss or damage suffered due to a specific event.
- Loss must be caused: The loss or damage must be caused to the indemnified party by an action or event.
- No fault of the indemnifier: The indemnifier is not necessarily at fault but is obligated to compensate for the loss.
- No need for benefit: The indemnifier doesn’t need to derive any benefit from the contract but is obligated to reimburse the indemnified party.
[2018 Spring Q. No. 4] What are duties of surety?
Answer: The duties of a surety in a contract are:
- Payment Duty: The surety must pay the debt or fulfill the obligation if the principal debtor defaults.
- Duty of Contribution: If there are multiple sureties, the surety is responsible for a proportional share of the debt.
- Duty to act in good faith: The surety must fulfill their obligation in accordance with the terms of the agreement.
[2018 Fall Q. No. 8] Who is a principal in an agency contract?
Answer: The principal in an agency contract is the person who authorizes another (the agent) to act on their behalf. The principal gives the agent the power to perform tasks, such as making decisions or signing contracts, within the scope of the agency.
[2018 Spring Q. No. 8] Define pledge and pledgee.
Answer: Pledge: A pledge is a contract where the borrower gives physical possession of goods to the lender as security for a loan or obligation.
Pledgee: The pledgee is the person to whom the goods are pledged, typically the lender or creditor.
[2017 Fall Q. No. 5] Discuss three essential elements of valid contract.
Answer: The three essential elements of a valid contract are:
- Offer and Acceptance: There must be a clear offer from one party and an acceptance of that offer by the other party.
- Intention to Create Legal Relations: Both parties must intend to be legally bound by the agreement.
- Consideration: There must be something of value exchanged between the parties (money, goods, services).
[2017 Fall Q. No. 2] Krishna agrees to let his house to Arjun for gambling purpose on a monthly rent of Rs 25,000. After six months, Arjun stops making the payment. How would you advise Krishna?
Answer: Krishna cannot legally enforce the rent agreement because it is for an illegal purpose (gambling). I would advise Krishna to:
- End the agreement immediately, as it’s based on illegal activities.
- Try to evict Arjun for non-payment, following proper legal procedures.
- Consult a lawyer to explore options for recovering unpaid rent or handling the eviction.
[2017 Spring Q. No. 3] Mahesh offered to sell his car to Hari for Rs 5,00,000. Hari accepted the offer by post. After dropping the letter of acceptance in post office, he started revoking the acceptance and naturally the revocation reached to the offerer earlier than the letter of acceptance. Is the revocation of acceptance valid?
Answer: No, the revocation of acceptance is not valid in this case.
In contract law, once an acceptance is made, it generally becomes binding when it is communicated to the offeror. In this case, Hari’s acceptance was posted, and thus, the acceptance would be deemed to have been communicated when the letter was posted, not when it was received by Mahesh.
Since the revocation reached Mahesh before the acceptance letter, the revocation was effective before the acceptance became binding. Therefore, the contract was never formed because the acceptance was effectively revoked before Mahesh could accept it.
Thus, there is no valid contract between Mahesh and Hari.
[2017 Spring Q. No. 10] Mohan lends a car to Ashish for his own riding only. Ashish allows Hari, one of his friends, to ride the car. Hari rides the car but the car accidentally falls and is damaged. Is Mohan entitled to claim compensation from Ashish?
Answer: Yes, Mohan is entitled to claim compensation from Ashish.
Since Mohan lent the car to Ashish for his own riding only, Ashish violated the terms of the agreement by allowing Hari to ride the car. This is considered a breach of trust or violation of the agreement’s terms.
Because of this breach, Mohan can hold Ashish liable for the damage caused to the car. Ashish may be responsible for compensating Mohan for the damage caused by allowing someone else to use the car.
[2016 Spring Q. No. 2] Yerina found a cell phone of Arun and returned it to him. Arun promises to offer 1000 as reward. Is this valid?
Answer: Yes, this is a valid promise.
In this case, Arun’s promise to offer Yerina Rs 1000 as a reward for returning his cell phone is a form of unilateral contract. A unilateral contract occurs when one party makes a promise in exchange for the other party performing an action (here, returning the phone).
Since Yerina has already returned the phone, the contract is formed, and Arun is obligated to fulfill his promise to pay Rs 1000. Therefore, Arun’s promise is valid, and Yerina is entitled to the reward.
[2016 Spring Q. No. 4] Define gratuitous bailment contract.
Answer: A gratuitous bailment is when someone (the bailor) lends their property to another person (the bailee) for free, without expecting payment. The bailee must take care of the property while it’s in their possession, even though they are not getting paid. For example, lending a friend your bike for free is a gratuitous bailment.
[2016 Spring Q. No. 4] Who is Pawner and who is pawnee?
Answer: Pawner: The person who gives goods or property as security for a loan. This is usually the borrower.
Pawnee: The person who receives the goods or property as security for the loan. This is typically the lender or creditor.
Deep agrees to steal a costly Mont Blanc pen from a shop for Arvind. Arvind promises to pay Deep Rs 200. Is this a contract? Give two reasons for your answer.
Answer: No, this is not a contract.
Reasons:
- Illegal Activity: Stealing is against the law, so the agreement is not valid.
- Cannot Be Enforced: The law does not allow or enforce agreements for illegal actions.
Bailment is a special types of contract. Discuss two important features of bailment.
Answer: Bailment constitutes a distinct category of contract in which an individual temporarily transfers their property to another party for a designated purpose.
Two key characteristics of bailment include:
Transfer of Possession: The owner, referred to as the bailor, relinquishes possession of their property to another individual, known as the bailee, for a specific objective, such as maintenance, storage, or conveyance.
Restitution of Property: Upon the completion of the designated purpose, the bailee is obligated to return the property to the bailor or to dispose of it according to the bailor’s instructions.
Pledge is a kind of bailment. How does it differ from bailment? State two differences.
Answer: Differences between Pledge and Bailment are:
Purpose:
- Pledge: Property is given as security for a loan.
- Bailment: Property is given for safekeeping, repair, or some other use.
Right to Sell:
- Pledge: The lender (pawnee) can sell the property if the borrower doesn’t repay.
- Bailment: The bailee cannot sell the property; they must return it.
What is contract of indemnity?
Answer: A contract of indemnity is an agreement where one person promises to compensate another for any loss or damage caused by specific events.
State essential elements of a contract.
Answer: Essential Elements of a Contract are stated below:
- Offer and Acceptance: One party offers, and the other accepts.
- Legal Purpose: The contract must be for a lawful reason.
- Consideration: Something of value (money, service, etc.) must be exchanged.
- Free Consent: Both parties must agree without pressure or fraud.
- Capacity: The parties must be legally able to enter into a contract.
Give two examples of bailment.
Answer: Examples of Bailment:
- Lending a book: You lend your book to a friend, and they return it after reading.
- Parking a car: You leave your car with a valet or in a parking lot for safekeeping.
Santosh pledges a watch to Sanjeev and takes Rs 15,000 from him. Sanjeev also spent Rs 500 for the maintenance of the watch. State two rights of Sanjeev if Santosh does not pay back the money on time.
Answer: If Santosh does not pay back the money on time, Sanjeev’s rights as the pawnee (lender) are:
- Right to Retain the Watch: Sanjeev can keep the pledged watch until Santosh repays the Rs 15,000 along with the Rs 500 maintenance cost.
- Right to Sell the Watch: If Santosh fails to repay, Sanjeev can sell the watch after giving proper notice to Santosh.
State two rights of indemnity holder under contract of indemnity.
Answer: Two rights of an indemnity holder under a contract of indemnity are:
- Right to Recover Loss: The indemnity holder can recover any losses, damages, or costs they suffer due to the actions covered in the indemnity contract.
- Right to Compensation for Legal Expenses: If the indemnity holder incurs legal expenses while acting within the scope of the contract, they can claim reimbursement from the indemnifier.
When a person enters into an agreement with a minor, what are the consequences? State two of them.
Answer: Consequences of an agreement with a minor are:
- Void Agreement: An agreement with a minor is void and not enforceable in court.
- No Legal Obligations: A minor cannot be held liable under the agreement, as they lack the legal capacity to contract.
Bailment is not pledge. Do you agree? Give reasons for your answer.
Answer: Yes, I agree.
- Purpose: Bailment involves delivering goods for safekeeping, repair, or use, while pledge involves delivering goods as security for a loan or debt.
- Right to Sell: In pledge, the pawnee can sell the goods if the debt is unpaid, but in bailment, the bailee cannot sell the goods.
All contracts are agreement and all agreements are not contract. Explain.
Answer: All contracts are agreements, but all agreements are not contracts.
Agreement: An agreement is a promise or set of promises made between two or more parties.
Contract: An agreement becomes a contract only when it is enforceable by law.
For example: A promise to gift something is an agreement but not a contract because it lacks consideration and legal enforceability.
Selling goods for money is a contract because it meets the legal requirements and is enforceable.
Ambika took a private car on rent for two days from Dinesh. Why is this contract called bailment? Give two reasons.
Answer: Ambika’s contract is called bailment because:
- Delivery of Goods: Dinesh delivered his car to Ambika for temporary use (rent).
- Return of Goods: Ambika is required to return the car after two days, which satisfies the condition of bailment.
Contract of guarantee has three parties. Name them.
Answer: A contract of guarantee involves three parties:
- Principal Debtor: The person who owes the debt or obligation.
- Creditor: The person to whom the debt is owed.
- Surety: The person who agrees to pay the debt or fulfill the obligation if the principal debtor fails to do so.
SHORT ANSWER QUESTIONS
[2023 Fall Q. No. 16] What is breach of contract? What remedies are available to an injured party for the breach? Click here for Answer
[2022 Fall Q. No. 13] All agreements are not contracted but all contracts are agreements. Do you agree? Discuss the essential elements for valid agreement. Click here for Answer
[2020 Fall Q. No. 15a] What is contingent contract? Discuss its features. Click here for Answer
[2021 Fall Q. No. 17] What do you understand by termination of a contract? What are the modes by which a contract can be terminated? Click here for Answer
[2020 Spring Q. No. 11] What is an acceptance? Who can accept an offer? Write the rules regarding the acceptance as per Nepalese Contract Law. Click here for Answer
[2019 Fall Q. No. 11] [2018 Spring Q. No. 13] “All contracts are agreements but all agreements are not contract.” Discuss. Click here for Answer
[2019 Fall Q. No. 17] Define law of contract. Discuss the elements required for forming a valid contract. Click here for Answer
[2019 Spring Q. No. 11] [2018 Fall Q. No. 11] What do you understand by the term “No consideration, no contract”? Discuss the exceptions to the rule. Click here for Answer
[2019 Spring Q. No. 15] What is breach of contract? What remedies are available to an injured party for the breach of contract? Click here for Answer
[2019 Fall Q. No. 15.b] Explain the rights of surety against creditor. Click here for Answer
[2019 Fall Q. No. 16.a] Discuss five important duties of a bailee. Click here for Answer
[2019 Fall Q. No. 16.b] Discuss important rights of a pledger. Click here for Answer
[2018 Spring Q. No. 11.a] Differentiate between Voidable and Void contract. Click here for Answer
[2018 Fall Q. No. 17.a] Free consent. Click here for Answer
[2017 Fall Q. No. 12] State and explain the essential elements of a valid contract. Click here for Answer
[2017 Spring Q. No. 12] What do you understand by contract? Explain the essential elements of a valid contract. Click here for Answer
[2016 Spring Q. No. 16] What is the meaning of contract? What are the types of contracts? Click here for Answer
Explain the rights of surety. Click here for Answer
Surety’s rights against the principal debtor. Click here for Answer
Surety’s rights against the co-sureties. Click here for Answer
Discuss five important rights and duties of a pledger. Click here for Answer
Discuss important rights of a bailor. Click here for Answer
Discuss about Finder of lost goods. Click here for Answer
What is contingent contract? Discuss its features. Click here for Answer
Discuss the five ways of discharging a surety from contract of guarantee. Click here for Answer
Discuss the rights of surety against the principal debtor. Click here for Answer
Discuss important duties of a pledgee. Click here for Answer
Discuss five important duties of a bailee. Click here for Answer